If legendary poet Virgil was writing today, he wouldn’t be warning us to beware of Greeks bearing gifts. Instead he’d be telling us to be wary of politicians showering us with money.
“I hear what you’re saying”, is a familiar response. “But any extra money from Canberra must benefit us, surely? We should take what we can get. It’s not like it’s coming out of Tasmania’s pocket?”
That’s the common perception. People are suspicious of candidates offering handouts or boasting of handouts already achieved. But if it’s extra from Canberra, you’d be a fool to look a gift horse in the mouth? But is it a gift horse? In most cases it’s not, it is not extra money.
When the Commonwealth Grants Commission decides the annual split-up of the GST pool between states it considers other grants from the Australian government. Most act to reduce the GST to which we would otherwise be entitled. Extra handouts are little more than GST payments in advance.
Just the other day we saw the Prime Minister in a carrot patch on the North-West coast promising more funds for irrigation. “Critical infrastructure”, he described it. Water for the Future grants affect GST relativities and hence are simply GST payments in advance. Why didn’t someone question, dare I say it, his fake generosity?
We might get an extra specific purpose grant in one year but in subsequent years it will be clawed back with reduced GST. The GST are general purpose grants that we as a state spend how we wish. We swap a specific purpose grant in Year 1 for reduced GST in Years 3, 4 and 5. That’s the way the system works. There is a clawback delay, but we eventually pay for the gift.
Another example is black spot funding, used to address problem sections of our road network. All of this is clawed back over time.
Some grants however are only clawed back 50 per cent, some not at all. The latter are fully quarantined. Grants in the former category include major road and rail funding, for the Midland Highway for instance. We end up paying for half the gift. On the other hand, a grant under the Roads to Recovery scheme has no impact on our GST relativity.
Clawback even occurs with major hospital infrastructure grants like the $340 million to assist with the Royal Hobart Hospital rebuild. Most of that was received years ago and has since been repaid with subsequent GST reductions. The current government is now trying to fund one of the largest infrastructure projects in the state’s history from current earnings.
Hands up anyone else who thinks that’s a dumb idea? How can the ordinary ongoing operations of government be properly funded when such a huge amount is being extracted from current earnings to pay for an asset with a life of 30-plus years? If one is searching for a reason for underfunding current health operations, look no further. Imagine trying to pay for a house from three years’ earnings. There wouldn’t be much left to put food on the table for those three years
I chair a sessional committee in the Legislative Council which recently decided to have a closer look at such grant arrangements; the system of horizontal fiscal equalisation as it’s called.
I know there are some who believe the role of legislative councillors should be confined to checking if a Bill has any typos then giving it the tick on the basis it was initiated and/or approved in the Lower House by a government with a majority and hence a mandate. So who are we to raise objections? I don’t accept my role is simply that of a glorified proofreader, nor do most of my colleagues. If we see a system that doesn’t appear to be working as it should, we will try to understand what’s going on and make recommendations if necessary.
I have been banging on my drum for years about the need for long-term infrastructure planning that straddles election cycles and does away with the porkbarrel. Everyone gives lip service to the idea but I sense a reluctance to take the politics out of infrastructure. Infrastructure grants to states tend to occur around election times. At least we are starting to hear about 10-year plans but we need more than talk.
We need a long-term plan for infrastructure spending where strategic benefit to the region, the state and, for major projects, the nation, is clearly articulated and prioritised. The benefit must be for the region, not the sitting member or candidate wanting our vote.
A notable omission in longer term planning is the absence of simultaneous funding plans for major projects. The updated masterplan for the RHH has put forward a six-stage plan (replacing the four-stage plan) to proceed “as and when capital funding is secured”. Dreams are fine but detailed plans for crucial facilities like acute care hospitals without an associated funding plan are pointless. An infrastructure grant from the Australian government is not a funding plan for a long-life asset if it’s all going to be clawed back in a few years via reduced GST allocations. We need to demand a better system.
There was a time when senators representing Tasmania acted as Praetorian guards for the state. Surely there must be issues where all 12 could agree on what’s best for the state and lobby for it instead of taking turns, standing in the background of media conferences, mindlessly nodding approval for a grant they know, or should know, will be paid back in a few years. As Virgil said, beware of gift givers.
The Mercury May 2, 2019Go Back